Asset control is a critical component of any financial plan. For most people, their largest asset is their home. One way to protect one's assets is to have adequate insurance coverage. This includes not only their home and auto insurance but also umbrella coverage and business insurance if they're a business owner.
A plan is also essential so that your client knows what to do with their assets in the event of their death. This includes having a will or trust and naming beneficiaries for their accounts. While it's impossible to completely protect one's assets from all risks, by taking some simple steps, you can help ensure that their hard-earned money is there for them and their family when they need it.
In today's article, let's explore wills and trusts. These are types of estate asset control essential in the case of someone's passing. If you have any clients weighing the two options and are wondering which to recommend, here's what you need to know:
A will is a legal document that sets out your wishes for what should happen to your property and possessions after you die. It can also appoint a guardian for your children.
Making a will is one of the most important things a person can do to protect their family and friends after they die. It allows the owner to decide what happens to their money, property, and possessions.
If a person dies without a will, their property will be distributed according to the intestacy laws, which may not be how they would have wanted.
Making a will is particularly important if the person has young children, as it allows them to appoint a guardian to care for them after the client's passing.
One should review their will regularly and update it if their circumstances change, for example, if they get married, have children, or buy a property.
A person can make their own will, but it's advisable to get professional help to ensure it is valid and correctly drawn up.
A trust is a legal arrangement in which one person (the trustee) holds property for the benefit of another person (the beneficiary). The trustee has a fiduciary duty to manage the property in accordance with the terms of the trust agreement.
The trust agreement dictates the terms and conditions under which the trust property will be held and administered by the trustee. The terms of the trust agreement may be revocable or irrevocable. A revocable trust may be amended or terminated by the settlor at any time, while an irrevocable trust cannot be amended or terminated without the beneficiaries' consent.
The trust property may consist of real estate, personal property, stocks, bonds, and other assets. The trustee has to manage and prudently invest the trust property and use the trust property only for the benefit of the beneficiaries.
The trustee may be an individual, corporation, or financial institution. The trustee must inform the beneficiaries of the status of the trust and provide them with an accounting of the trust property.
The beneficiaries have a right to receive information about the trust and distributions from the trust in accordance with the terms of the trust agreement.
When it comes to estate planning, there are a lot of terms thrown around that can be confusing to the average person. The distinction between wills and trusts is essential, as each has different benefits and drawbacks.
Although the terms are sometimes seen interchangeably, there is a big difference between a will and a trust. Simply put, a will outlines how you want your assets to be distributed after you die. A trust can hold purchases on your behalf and distribute them according to your wishes, either during your lifetime or after your passing.
One of the key differences between a will and a trust is that a will only goes into effect after you die, while a trust can be created during your lifetime.
This means that with a will, your beneficiaries will not have access to your assets until after you die, which can be a significant disadvantage if you become incapacitated before your death. With a trust, however, your assets can be transferred to your beneficiaries immediately, which can be helpful if you become incapacitated.
There are several key advantages of using trust over a will. First, trusts can avoid the probate process, which can be lengthy and expensive. Probate refers to the legal process of validating a will and distributing assets. Because trusts avoid probate, assets can be distributed more quickly and privately.
Another advantage of trusts is that they can be used to manage assets during your lifetime. For example, if you have a child with special needs, you can set up a special needs trust to provide for their care. Trusts can also be used to manage minors' assets until adulthood.
Trusts can also provide asset protection. If you are concerned about your assets being seized by creditors or lawsuits, you can place them in a trust. This can protect your assets and ensure they are available for your beneficiaries.
Trusts also have some disadvantages. The biggest disadvantage is that they can be complex to set up and manage. You must work with an experienced attorney to draft and fund your trust.
Another disadvantage of trusts is that they are not always private. In some areas, the contents of trust are public records. Your beneficiaries and their share of the assets may be made public. Finally, trusts can be inflexible.
Once you create an irrevocable trust, it cannot be changed. This can be disadvantageous if your circumstances change or if you want to change your beneficiaries.
It is essential for legal counsel to thoroughly discuss which tool—wills or trusts—is best for a client's and their family's unique circumstances. Each option has pros and cons, and their decision will ultimately come down to what makes the most sense for their particular situation.
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